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The Dollar and Manipulation Control the Market
The Dollar and Manipulation Control the Market
Courtesy of Chris Vermeulen of The Technical Trader
Over the weekend I had an interesting conversation with a local trader. We typically meet a few times a year to share our market outlooks, new trading tools and techniques, and usually finish our session off in a debate about the US market manipulation and how to trade around it.
Talking about market manipulation always opens up a can of worms and sparks some interesting theories… And while everyone has their own views and opinion on this subject I thought I would briefly share the main points I pulled from our conversation.
I did talk about the dollar index last week, but the recent price action unfolding today is important so I’m going to recap on it again.
My Weekend Conversation Key Thoughts:
Point form thoughts supporting Lower Equity prices and a Higher Dollar:
- Dollar index looks ready for a major rally (high dollar means lower stocks)
- SP500 may have just formed a double top
- SP500 closed strongly below the 20 day moving average
- First week of May for the past two years have been intermediate market tops
Points supporting Higher Equity prices and a Lower Dollar:
- Countries around the globe are trying to keep their currency value low including the United States.
- Presidential cycle strongly favors higher stocks prices which means the dollar should not rally until Nov.
What do all these points mean? Let’s take a look at the dollar charts below…
4 Hour Dollar Index Chart:
This chart time frame allows us to see all intraday price action while being able to zoom out several months for patterns along with key support and resistance levels.
Over the past few months the dollar has been consolidating sideways. Within this consolidation it has formed two bullish falling wedges with the most recent breakout last week right on queue.
Using this 24 hour futures dollar index chart we can see where things are trading through the weekend. On Friday the dollar index closed around the 79.50 level. As you can see the dollar has surged Sunday night by more than half a penny breaking through its down trend line.
The next few weeks will continue to be exciting ones as strong moves in the dollar will create wild movements in stocks and commodities.
Long Term Weekly Dollar Index Chart:
If you zoom WAY OUT using the weekly chart this shows you the two major areas where the dollar index is likely to reach come November. Also with these levels are my SP500 price points which are simply numbers I pulled from the charts using basic analysis. I say this because I’m not into long term forecasting but rather shorter term price movements. A lot can change between now and then.
So, if the dollar index rallies to the 86 – 88 level then I would expect the SP500 to be trading back down at the 1000 level. If this takes place, the Fed will likely issue QE3 to jam the dollar back down and boost equities.
The flip side of the coin is that the dollar rolls over here and gets pulled down. This will boost stock prices in favor for the president’s election. After that the dollar would likely rally which in turn would put a major top in the stock market, kick starting a bear market.
The big question…
Do you short the market in anticipation of rising dollar and falling stock prices? OR do you buck the trend and stick with the theory of a lower dollar value and presidential cycle?
The charts above clearly show how we are entering a major tipping point for the market and the next couple months are likely going to provide some big price swings for stocks, commodities and currencies.
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Is the point here that maybe we too are sheeple? If we all are smart enough to understand that there is all kinds of intervention, maybe we should keep pushing all the theories out there. Everyone talks about <they> but what if we just kept pushing on the details of <they>? If we can barely get a handle on who is moving what, how is the average guy/gal going to figure it out. Obviously, the American population would be furious if they understood that ultimately Bernanke was making them pay for the brilliant bonuses that have been handed out for the past 10 years! I guess we will have to wait until benzine in the US gets close to what it costs here in Europe for the Americans to understand the effects of their devalued currency.
Idiot CNBC statement of the day.. "Gold is priced in US Dollars" last time I checked, you don't have to convert to dollars to purchace Gold?
I saw that. That guy was a great combination of stupid and annoying.
I don't know if you have read the FOrtune 500 report on 2011 corporate results, but the top corporatons of USA have NEVER made so much money. Talk about decoupling; if USA and EUrozone are Not decoupled, the 1% and the general economy are. Ominous trends for First world livers, as the top 500 make their money elsewhere, pay minimal taxes and don't employ many first world workers...just look at Apple. New world Oligarchy order is here to stay.
Exxon Mobil - Fortune 500 - XOM
The author of this article is consistantly wrong about almost everything. The dollar is not going to rally. It is about to get rescued from collapse at 78 again. But first it is going to drop to 78.
Ilene is a valued contributor and I look for her comments. Ilene has made many observations that have been correct. Quinvarius- it is not her doing that there are about 7 decision makers people pretty much running the dollar show these days. It is ironic though when you do consider for such a <loser> currency that just controlling this one commodity seems to keep all the rest in check ;)
Ilene hardly writes her own stuff whirlybird. She is a distributor of promotional content wrapped in analysis. Not sure what the arrangement is but if I had to guess I'd say there are monetary transactions involved.
I've subscribed to the original author's letter before... wasnt too correct, though I found it useful in determining what everybody in the market was thinking - good contrarian value that.
I would pick the ladder, until after the elections....then I would short the shit out of everything I had, except for Gold/Silver (which I would long dong silver).
Shit hits the fan in 2013.......that's when the doom scenarios start to happen.
I used to day trade in the 90's - got back in last year - Boy am I fucking sorry -this totally blows - the worst part is they don't even try to hide it -
The cops looting the store in broad daylight in front of the news camera and nobody gives a crap.
HarryM,
Would love to know a bit more.
I was doing well until 9th March 2009, since then slowly losing. The only thing keeping me going is it WILL go and when it does, it'll make 2008 look like a picnic, which is why TPTB are so DESPERATE to keep the stock market up. That and the influence of HFT, which makes any price discovery impossible. A 200 point rise in the Dow since last night on NOTHING.
DavidC
It's the lack of retail that is scaring me - and the coordinated Global CB efforts, and the complete lack of even pretending or shame by the Fed - I mean , how do they show their faces in public after the move this morning?
Only reason I'm still in is because I believe it will blow, but with the low Volume (kind of like owning 10% of stock in a company and your partner owns the other 90%), they can milk this a long time.
Worse yet, because they keep doubling down over and over , I fear not just a market drop, but a potential drop to zero .
They just can't stop themselves - If they stopped the manipulation right now, the Dow may hit 4000, but it would live to see another day and come back slowly, it they keep it up it will be game over -- all your ones turn into zeros.
I plan to get out on the next major drop and convert to real estate and gold before it's too late.
HarryM,
Thanks, very interesting. Yes, I agree with you, I've said to people that if genuine debt deleveraging occurs (either default or people living within their means) I could see the Dow back at 3,500 and the FTSE under 2,000.
I also agree with what you say about them not being able to stop themselves. It's absolutely crazy and yet they seem determined to continue and to hell with people.
Despite the size of the drop, I only really made money (since given back) in the three months to the low of March 2009. Given I think NOTHING has got any better since then, I'm ready for a move down but it's got very frustrating (echoed by many other people I've read).
I hope you get your goal, I'm aiming to get back to where I was on 9th March 2009.
DavidC
Good luck - keep in mind all we ever get to see is the tip of the iceberg.
The only question is what will reality hit? Because it seems it will never in this market so why worry?
Wow.. Tell me more. I am a gentelman and a scholar with an enquiring mind
While all information is appreciated, this is hardly "news".
"There are no markets anymore.....only interventions."
Chris Powell, G.A.T.A., 2009
history may repeat itself with a slight twist. QE3.0 already started, but disguised as LTRO, dollar swap, low interest rate till 2014 and operation twist.
the investing community is too focused on the near to medium term, which is why most professionals don't understand the merits of precious metals that are still so much unvervalued.
silver/gold stackers are too focused on the eventuality and inevitability of fiat money collapse. focusing on and planning for the long term is a virtue that very few appreciates/has.
the old greek guy who committed suicide obviously didn't understand the fiat money game and never made any efforts to prepare for the collapse.
"The big question…
Do you short the market in anticipation of rising dollar and falling stock prices? OR do you buck the trend and stick with the theory of a lower dollar value and presidential cycle?"
Answer: Vegas. More fun, free drinks, and no illusion that you are doing anything other than gambling now that we're all just waiting for the decision of what a few bankers want the market to do next.
How about 100% Cash and whatever PMs you have. I shut down both my accounts today completely.
Not worth wasting my time in either direction. It is too rigged and manipulated.
The PMs I have I bought three years ago or even longer.
I'll be back in the markets "ONLY" after I hear about the crash. (Flash Crash does Not Qualify)
Pretty much with the added benefit of not having to lie to yourself in order to participate.
The real big question is how well can you isolate your earned wealth from the Ponzi knowing that eventually it will do what all Ponzi’s do and how do you protect yourself and your family from the inevitable social destruction it will produce.
get out of the way when it falls, make sure you have as little skin in the game as possible, then when it does fall, take advanatge of the world wide yard sale.